Posted by: Patricia Salkin | May 25, 2014

Ninth Circuit Court of Appeals Finds That Requirement of Raisin Producers To Divert A Percentage Of Their Annual Crop To A Reserve Did Not Amount To A Per Se Takings Claim

The Secretary of Agriculture requires California producers of certain raisins to divert a percentage of their annual crop to a reserve. The percentage of raisins diverted to the reserve varies annually according to that year’s crop output. Subject to administrative and judicial review, the Secretary can impose a penalty on producers who fail to comply with the diversion program. Plaintiffs–Appellants Marvin and Laura Horne (“the Hornes”) challenged this regulatory program and the Secretary’s ability to impose a penalty for noncompliance, as running afoul of the Takings Clause of the Fifth Amendment. In district court, the Hornes alleged they were not “handlers” within the meaning of the regulation and further alleged the agency’s order violated the Takings Clause and the Eighth Amendment’s prohibition against excessive fines. The district court granted summary judgment in favor of the Secretary on all counts. The Court of Appeals for the Ninth Circuit affirmed the district court with respect to the Hornes’ statutory claims, holding that even if the AMAA’s definitions of “handler” and “producer” are ambiguous, the Secretary’s application of the Marketing Order to the Hornes was neither arbitrary nor capricious, and it was supported by substantial evidence. The Ninth Circuit further held that it lacked jurisdiction over the Fifth Amendment claim, and the Hornes brought their takings claim as producers rather than handlers. Because the AMAA did not displace the Tucker Act with respect to a producer’s claim, the court held that jurisdiction over the takings claim fell with the Court of Federal Claims rather than the district court. The Hornes then sought and the Supreme Court granted certiorari with respect to the jurisdictional issue. Reversing the Ninth Circuit’s judgment on that issue alone, the Supreme Court held (1) the Hornes brought their takings claim as handlers, and (2) the Hornes, as handlers, may assert a constitutional defense to the underlying agency action in district court.

On de novo review the Ninth Circuit first discussed that the Takings Clause does not prohibit the government from taking property for public use; rather, it requires the government to pay “just compensation” for any property it takes. Thus, a takings challenge follows a two-step inquiry. First, we must determine whether a “taking” has occurred; that is, whether the complained-of government action constitutes a “taking,” thus triggering the requirements of the Fifth Amendment. If so, we move to the second step and ask if the government provided just compensation to the former property owner. The cases of Nollan and Dolan held that a condition on the grant of a land use permit requiring the forfeiture of a property right constitutes a taking unless the condition (1) bears a sufficient nexus with and (2) is roughly proportional to the specific interest the government seeks to protect through the permitting process. If those two conditions are met, then the imposition of the conditional exaction is not a taking. The court found that the Secretary did not authorize a forced seizure of the Hornes’ crops, but rather imposed a condition on the Hornes’ use of their crops by regulating their sale, and the Marketing Order “contains no absolute requirement of the delivery of reserve-tonnage raisins but rather only “a conditional one.” Because the court found there was a sufficient nexus between the means and ends of the Marketing Order, it held that the Marketing Order and its penalties do not amount to a physical per se taking and affirmed the lower court’s holding against the Hornes.

Horne v US Dept. of Agriculture, 750 F.3d 1128 (9th Cir. CA 5/9/2014)

The opinion can be accessed at:

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